Acceuil » Global Tax News – May 2019

Global Tax News – May 2019

RUSSELL BEDFORD NEWS

Russell Bedford appoints joint members in Cali, Colombia

Russell Bedford’s appointment of MC Montes S.A.S. and Ascendis S.A. as its joint members in Cali completes the national network in Colombia along with members in Bogotá, Cartagena and Medellín. Stephen Hamlet said: “Russell Bedford has held a dominant position in Latin America for many years; the addition of this new group, completing our coverage in all four major Colombian cities, is evidence that this position is continuing to grow. »

Russell Bedford

 MEMBER NEWS

UK member firm launches new website

UK member firm Hallidays has launched its new-look website. It focuses on ‘thought leadership’ and is aimed at helping business owners with the challenge of growing their businesses in a VUCA (volatile, uncertain, complex and ambiguous) world.

Russell Bedford

 

NORTH AMERICA

 Ways and Means issues Trump tax subpoena

The House Ways and Means Committee issued subpoenas Friday ordering Treasury Secretary Steven Mnuchin and Internal Revenue Service Commissioner Charles Rettig to turn over President Donald Trump’s tax returns by May 17th at 5 p.m. “The IRS is under a mandatory obligation to provide the information requested,” the subpoena states, adding “The IRS has had more than four weeks to comply with the Committee’s straightforward request. Therefore, please see the enclosed subpoena.” The demand is for the President’s individual income tax returns from 2013 to 2018, all “administrative files” such as affidavits for those income tax returns, and income tax returns for a number of Mr Trump’s business holdings such as the Donald J. Trump Revocable Trust, an umbrella entity that controls dozens of other businesses including the Mar-a-Lago Club in Florida. On Saturday, the President tweeted that voters did not care whether he released his tax returns during the 2016 election, bucking a tradition set by presidential candidates in past elections. 

Washington Post   CNBC   The Hill

 Amazon spars with IRS in $2bn tax adjustment case

Amazon and the IRS are facing each other in court in a dispute involving more than $2bn in tax adjustments the agency imposed on the company over the value of intangibles, such as intellectual property, patents, and trade names, that Amazon transferred to its European business in Luxembourg. The IRS had adjusted Amazon’s tax liability for 2005 and 2006 by $2.2bn, arguing that Amazon undervalued the assets. That adjustment would result in a tax bill of about $230m. Amazon argues that the IRS was trying to apply regulations retroactively to make its case. “If the IRS were to win, Amazon, Coke and Facebook are in for a long ride,” said William Byrnes, a professor at Texas A&M University School of Law. But that seems unlikely, he said, because courts have decided in taxpayers’ favour on similar questions in previous cases. An ITEP analysis shows that of the Fortune 500 companies that had already filed their 2018 taxes, 60 were profitable and yet avoided all federal income tax. These included such names as Amazon, Chevron, General Motors, Delta, Halliburton, and IBM. Amazon said in a company statement: “Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate.”

Bloomberg   NBC News   Fortune

 SCOTUS hears arguments on major state trust tax case

The Supreme Court has heard oral arguments in a case involving a state’s ability to tax income from a trust based on the beneficiaries residing there before taking any distributions. North Carolina Department of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust will see the Court rule on whether the Due Process Clause of the Constitution prohibits states from taxing the undistributed income in a trust that has no ties to the state other than a discretionary beneficiary residing in the state. In the case before the court, Joseph Lee Rice III, father of the woman the trust is named after, created the family trust in New York in 1992. He divided the trust into three parts for his three children. Kimberly Rice Kaestner moved to North Carolina and took loans from the trust for business opportunities, which she paid back. Although she never received any discretionary distributions, North Carolina still taxed income from the trust. She paid more than $1.3m under protest to the state and sued to get it back. The attorney for the trust, David A. O’Neil, told the justices that the trust had no connection to North Carolina because no funds from it were distributed there. The Supreme Court’s ultimate decision could have a major bearing on the nation’s trust industry, which generates more than $120bn in earnings every year.

Accounting Today

 States sue Treasury over nonprofit donor disclosures

Letitia James and Gurbir Grewal, attorneys general for New York and New Jersey respectively, have filed a lawsuit against the Treasury Department and the IRS, arguing that the agencies have failed to respond to information requests about their guidance reducing donor disclosure requirements for certain tax-exempt groups. Last July, the federal government said that the IRS would cease collecting donor information from business associations, labor unions and what are called « social welfare » organizations. The Trump administration and many congressional Republicans have said that the guidance helps to protect taxpayers’ privacy and prevent taxpayers for being targeted for their political beliefs. The lawsuit expresses concerns from the states that the change will hamper their oversight of such organizations in their states. « My office depends on these critical donor disclosure forms to be able to adequately oversee non-profit organizations in New York, » said Ms James. “Not only was this policy change made without notice, the Treasury and the IRS are now refusing to comply with the law to release information about the rationale for these changes. No one is above the law — not even the federal government — and we will use every tool to ensure they comply with these regulations to provide transparency and accountability. »

The Hill   Fox News   NJ.com

 Senators propose end to multi-state tax headaches

Sens. John Thune (R-SD) and Sherrod Brown (D-OH) have reintroduced a bill that would greatly ease the filing burden on employees who travel to multiple states to work during the year. The Mobile Workforce State Income Tax Simplification Act would simplify and standardize state income tax collection for employees who travel outside of their home state for temporary work assignments; it would also help employers who must comply with withholding and reporting requirements. The bipartisan bill states that: “No part of the wages or other remuneration earned by an employee who performs employment duties in more than one state shall be subject to income tax in any state other than — (1) the state of the employee’s residence; and (2) the state within which the employee is present and performing employment duties for more than 30 days during the calendar year in which the wages or other remuneration is earned.”

Accounting Today

 San Francisco weighs IPO tax 

San Francisco Supervisor Gordon Mar plans to propose a new tax that would target a slew of multibillion-dollar technology companies, including Slack and Airbnb, preparing to go public this year. The proposal for a 1.12% payroll tax on stock-based compensation would, Mr Mar said, help to offset the “negative impacts” of a one-time injection of wealth into city, which already grapples with growing economic disparities, as well as an alarming housing crisis. Combined with San Francisco’s existing payroll tax rate of 0.38%, the new tax would reinstate the city’s previous tax rate of 1.5% on stock-based compensation if it becomes law. Separately, California Gov. Gavin Newsom has signed a law requiring companies such as Amazon and eBay to collect sales taxes on behalf of some out-of-state sellers. Companies will be required to collect the taxes on behalf of merchants, although only if they have at least $500,000 of annual sales in California. State officials predict the law will generate an extra $759m in state and local taxes by 2021.

Fox Business   The Sacramento Bee    US and News World Report

Manufacturers sue U.S. to stop tax regulation

The National Association of Manufacturers is suing the federal government in the U.S. Court of International Trade, alleging that a tax regulation affecting winemakers and alcohol companies violates clear congressional intent. The lawsuit claims that the Treasury, and Customs and Border Protection, last year  impermissibly ended refunds of excise taxes that winemakers had been getting and that spirits makers and others also wanted. The dispute stems from what is known as “drawback.” Under U.S. law, companies can get import taxes refunded if they have a matching or similar export. In the manoeuvre in question, companies have bottles on which they have never paid excise taxes because they were produced for export. Then, as they import bottles, companies seek refunds of the import taxes. However, the Treasury has said that such a “double drawback” is impermissible.

Wall Street Journal   Law 360

Philadelphia is suing Uber over allegation of unpaid taxes

Philadelphia is suing Uber to get the company to open its books in a bid to recoup two years of taxes it alleges that the tech giant owes for 2015-2017. Uber operated in Philadelphia without authorization during some of that time. Ride sharing wasn’t legalized in the city until November 2016. In 2017, Uber made more than $320m in Philadelphia, according to Parking Authority records. The suit comes after Uber ignored multiple requests for financial data from the Department of Revenue, the suit states. It asks a judge to order Uber to provide the financial data within 30 days and fine the company $900 for failing to comply with the city’s requests for information.

The Philadelphia Inquirer

Income tax payers can choose to have refunds paid in Bitcoin

Income tax payers in the U.S. now have the option to receive their federal and state refunds in Bitcoin, through a joint endeavour by crypto payment processor BitPay and tax services company Refundo. Tax filers using Refundo’s system who opt into the program will have to set up an account to get a unique routing and account number to input on their tax return. They will also have to provide necessary background information for know-your-customer (KYC) rules, as well as a Bitcoin wallet address. Once the IRS or state has deposited the refund, BitPay will process the payment and send bitcoin to taxpayers’ wallets.

Bitcoin Magazine   Coindesk

 Zurich to pay $5.1m to U.S. in tax evasion case

The U.S. Department of Justice has said that Zurich Insurance will pay a penalty of $5.1m to the United States in a case involving insurance policies and accounts used by U.S. customers to evade taxes. “Zurich had approximately 420 U.S. related policies . . . with an aggregate maximum value of approximately $102m, for which the U.S. taxpayer customers did not provide evidence that they had declared their policies to U.S. tax authorities,” the DoJ said in a statement.

Euronews

 

EUROPE

Gucci owner agrees to Italy tax settlement

Kering has agreed to pay a record €1.25bn to settle a dispute with Italian tax authorities who accused the company’s Gucci brand of evading taxes on more than €1bn in revenues between 2011 and 2017. The sales were booked through Kering’s Swiss-based Luxury Goods International subsidiary; prosecutors argued that taxes should have been paid in Italy, rather than Switzerland. “The group has concluded today a settlement with the Italian Revenue Agency relating to claims vis-a-vis its Swiss subsidiary . . . The settlement will involve the payment of 897 million euros in additional taxes, along with further payment for penalties and interest,”  Kering said in a statement. Separately, the family of French billionaire businessman and Kering CEO Francois-Henri Pinault has said it would not be seeking any tax breaks regarding its €100m donation for repair work to the city’s damaged Notre-Dame Cathedral. Charitable donations in France normally benefit from a more than 60% deduction against tax.

Financial Times   France 24   SwissInfo   Reuters   New York Post

German prosecutors target UBS

Prosecutors in the German city of Mannheim want to fine Swiss bank UBS about €83m over alleged help in client tax evasion. The prosecutors’ office said in a statement that  executives at the bank’s UBS Deutschland unit aided several clients in breaking tax laws between 2001 and 2012, and were helped by executives at the Swiss parent company. “The prosecutor’s office in Mannheim has been investigating the alleged conduct from before 2012 for six years. We do not believe the prosecutor’s claim is supported by the facts or the law and we intend to vigorously oppose this administrative proceeding,” UBS said in a statement.

Reuters   Bloomberg   Luxembourg Times

Irish and Dutch to stand firm on EU tax policy

Irish Taoiseach Leo Varadkar and Dutch prime minister Mark Rutte have said their respective countries intend to stand firm on the issue of tax sovereignty. Mr Varadkar said the two countries “strongly believe that tax is a sovereign issue, that individual member states should decide for themselves.” At his meeting with Mr Rutte in The Hague ahead of an EU leaders’ summit in Sibiu in Romania, Mr Varadkar noted that the OECD was making “good progress” in bringing forward a global strategy for dealing with major companies.  “We also appreciate that we can’t have a world where very large corporations and very wealthy companies avoid paying tax anywhere. That’s why we strongly support a global solution to some of those issues,” he said.

Irish Times

Facebook to pay more tax in France

Facebook is to pay more tax in France after changing its local operating model and as the government imposes a new levy on the revenue of digital companies. Laurent Solly, the US giant’s French unit chief, said that Facebook last year said all revenue from sales in France would be declared in the country and it will “naturally” pay the new revenue tax. The French unit has grown rapidly and Facebook is “in many ways also a French company,” Mr Solly told Le Parisien. Meanwhile, Google has gained another victory in its fight against a €1.1bn French tax bill after the Paris administrative court of appeals rejected prior French tax authority claims that the US company abused loopholes to avoid paying its fair share. The lower court ruled that French taxes weren’t illegally dodged by sales being routed through Ireland.

Bloomberg   Bloomberg

Czech plan to tax global internet giants

The Czech finance ministry says a proposal is being finalised to tax global internet services, mainly advertising, at a 7 per cent rate. The ministry said the tax could become effective around the middle of next year and conservative estimates indicate 5bn crowns ($218.72m) being added annually to state budget revenue. “The digital tax will apply to the most significant global players and is a reaction to the failure of solving this (issue) on the European Union level,” finance minister Alena Schillerova said.

Reuters   Czech Radio

UK taxman’s supercomputer nudges taxpayers

Connect, the computer system which gathers data for HMRC, has helped the UK tax authority collect an extra £3bn in tax since it was first used in 2010, with experts saying that growth in the volume of information it can process quickly has seen an increase in the number of “nudge” letters sent out to encourage individuals to disclose sources of income. HMRC says the computer system can help staff find anomalies between such things as bank interest, property income and other and tax liabilities, creating a profile of people and firms who may not be paying the right amount of tax. Meanwhile, HMRC is deleting voice records of five million taxpayers as the way they were collected broke privacy rules, with the Revenue failing to gain explicit consent from individuals using a voice ID system for telephone enquiries. The Information Commissioner’s Office (ICO) said there had been a « significant » breach of data laws and issued an enforcement notice under GDPR rules to ensure the data is deleted.

The Daily Telegraph   Daily Mail   The Times   City AM   BBC News

Matalan founder wins £84m tax appeal

HMRC has lost out on £84m in tax after John Hargreaves, the founder of retailer Matalan, convinced a court that the Revenue took too long to go after money relating to a tax return filed in 2002. An investigation was opened in 2004, with HMRC being alerted to the fact that Mr Hargreaves, who had told the tax authorities that he had moved to Monaco and was no longer a tax resident in the UK, was working for three days a week at the firm’s head office in Skelmersdale in England. The Revenue did not issue its charge for £84m in unpaid capital gains tax until 2007.

The Daily Telegraph  

Test case blow for BBC stars

Hustle star Robert Glenister has lost his appeal against a 2017 tribunal ruling that the actor should have been paid by the BBC as a full-time employee rather than as a freelance service provider. For 10 years from 2004, Mr Glenister’s BBC earnings were paid to his Big Bad Wolff company, meaning he paid tax at a rate of 20% instead of 45%. He has been told he must hand over £147,547 in backdated National Insurance contributions. The court heard that there were « a number of other appeals, particularly concerning members of the acting profession, awaiting the outcome of this case ».

The Sun   The Daily Telegraph

Macron promises tax cuts in new round of French reforms  

Emmanuel Macron has promised €5bn worth of cuts in personal income tax and a return to inflation-indexing for pensions in response to the gilets jaunes protests. The French President also said there would be cuts to public spending but added that the French needed to work more – like its European “neighbours.”

Financial Times   Euronews   The Guardian   Deutsche Welle

 

AFRICA

New sales tax plan causes discord in Zambia

Zambia’s finance minister Margaret Mwanakatwe is pressing ahead with a new non-refundable sales tax amid criticism from business. The African nation’s mining sector says the tax is deterring much-needed new investment. Ms Mwanakatwe said the proposed tax change was necessary to stop “debt escalation” and also said it would help pay outstanding refunds “and more importantly increase revenue collection to support the government’s social development programmes.”

Reuters Africa

Morocco weighs measures to increase tax revenue

Morocco is considering new measures to increase the tax base to counter fiscal pressure on the middle class and increase funding for social services. Finance minister Mohamed Benchaaboun said new measures would seek to compel the rich to pay their « fair » share of taxes as well as countering tax evasion and fraud. Oxfam’s Asmae Bouslamti says Morocco should impose a wealth tax to reduce the gap between the North African country’s richest and poorest.

Haaretz

  

LATIN AMERICA

Atacadão to book provisions on Brazilian tax dispute

Carrefour has announced that its Brazilian unit Atacadão will book a provision to cover for risks related to a Brazilian tax dispute. The company had been the subject of 240 tax disputes in several Brazilian states, for a total amount of 815m reais ($205.5m). “Following an unfavourable decision by the Supreme Court on May 9th, 2019, Atacadão decided, as a precautionary step, to record a provision for the entire potential risk,” Carrefour said. “The Supreme Court’s decision is subject to appeal and Atacadão will continue to defend its interests in the context of all ongoing proceedings. The cash flow impact on Atacadão will depend on the outcome and timetable of these proceedings,” the retailer added.

Reuters   Marketwatch

Argentina raises tax rebate for Mercosur auto exports

Argentina’s ministry of labour and production is raising tax refunds to 6.5% from 2% for auto exporters to the Mercosur bloc that includes Brazil, Paraguay and Uruguay. Statistics from the local Association of Automotive Makers (ADEFA) indicate auto exports have fallen 11.4% in the year to date. The decision to raise tax refunds should help “exports recover their dynamism and rev up an increase in the production of units planned for 2019,” Argentine minister of production and labour Dante Sica said.

Reuters

Mexico’s landmark tax deal with technology platforms

Mexico is preparing the rollout of a landmark tax deal with technology platforms. The plans were confirmed by Mexican deputy finance minister Arturo Herrera, who nevertheless declined to elaborate. Bloomberg notes that the proposed program would collect what drivers should already be reporting and paying monthly rather than create a new tax. Tax collection in Mexico is the worst among OECD members.

Bloomberg

 

ASIA-PACIFIC

Pakistan seeks to convince IMF on tax amnesty scheme

Pakistan’s government is looking to convince the International Monetary Fund (IMF) about the feasibility of its tax amnesty scheme by saying it would help broaden the local tax base. The Nation notes that the IMF doesn’t typically favour such schemes, saying they are usually unsuccessful in mobilising revenues.  Pakistan has been requested by the IMF to increase its tax collection target to Rs5.4-5.5 trillion in next fiscal year by taking additional tax revenue measures of Rs600-Rs700 billion in the upcoming budget. Meanwhile, Pakistan has appointed chartered accountant Syed Shabbar Zaidi to be the new head of the Federal Board of Revenue following the sacking of Jahanzeb Khan amid ongoing bailout talks with the IMF.

The Nation   Reuters

Japan’s consumption tax increase could be delayed again

A proposed consumption tax hike in Japan to 10% from 8% later this year could be delayed if a survey of business sentiment for June “shows a risky outlook,” said Koichi Hagiuda, executive acting secretary-general of Prime Minister Shinzo Abe’s Liberal Democratic Party. Mr Abe has on two occasions postponed a plan to raise consumption tax.

Japan Times

Philippines rice tax angers farmers

Farmers in the Philippines say the introduction of a tariff on rice imports has reduced their incomes by more than half. President Rodrigo Duterte says the levy will help local farmers and put a brake on rising prices.

Aljazeera

China to continue tax preferences

China’s cabinet is to extend preferential corporate income tax policies for integrated circuit (IC) and software companies as Beijing seeks to attract more investment from home and overseas in the two sectors.

Xinuanet